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Path dependence, distributive cycles and export capacity in a BoPC growth model

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  • Dávila-Fernández, Marwil J.
  • Sordi, Serena

Abstract

In Dávila-Fernández and Sordi (2019), we have extended Goodwin's (1967) model to study the interaction between distributive cycles and international trade for economies in which growth is balance-of-payments constrained (BoPC). Building on that set-up, we investigate the implications of allowing exports to be a function of the capital stock. Using the existence part of the Hopf bifurcation theorem, we show that the resulting 3-dimensional system admits a limit cycle solution. We rely on numerical simulations to verify if fluctuations are persistent and bounded. Applying panel cointegration techniques, we also provide empirical evidence for a sample of 19 OECD countries between 1950–2014 that gives support to the formulation adopted for the exports function. Our main contribution lies in developing a simple base-line model to study distributive dynamics in open economies in line with recent developments in the BoPC growth literature. Furthermore, we show how the interaction between demand and innovation waves can generate complex dynamics as a representation of the statement “history matters”.

Suggested Citation

  • Dávila-Fernández, Marwil J. & Sordi, Serena, 2019. "Path dependence, distributive cycles and export capacity in a BoPC growth model," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 258-272.
  • Handle: RePEc:eee:streco:v:50:y:2019:i:c:p:258-272
    DOI: 10.1016/j.strueco.2019.07.009
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    Cited by:

    1. Ricardo A. Araújo & Marwil J. Dávila-Fernández, 2018. "Some new insights on the empirics of Goodwin’s growth-cycle model," Department of Economics University of Siena 790, Department of Economics, University of Siena.

    More about this item

    Keywords

    Growth cycle; Path dependence; Thirlwall's law; Distributive cycles; Hopf bifurcation; Cointegration;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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